4 minute read
I have often debated whether the mortgage rate lockdown is real or just another housing myth. At first glance, the lockdown theory seems like common sense, so when mortgage rates jumped from 3% to 7% in 2022, it was logical to wonder why anyone would choose to sell their home. People with low rates seemed “locked in,” which would mean first-time buyers, cash buyers or investors would be the ones driving home sales, since those moving up or down wouldn’t want to sell and then buy at such a higher rate.
But that’s not exactly what happened, as we can now see in the national mortgage database, which shows we have more people with 6%+ mortgage rates than those with 3% and lower. Let me explain.
What the data shows
Since the end of 2022, I’ve pointed out that people have continued to sell homes with low mortgage rates to buy others with higher rates. This is normal behavior, as millions of Americans sell their homes to purchase others each year, regardless of where mortgage rates are. As the data below shows, more people now have mortgage rates above 6% than below 3% and the share of households with mortgage rates between 3% and 6% has also fallen in the past few years.
In addition, since Q1 of 2022, the number of homeowners with mortgage rates between 2%-5% has been falling as a percentage of mortgage rates outstanding.
Homeowners with mortgage rates at 6% or higher:
- Q1 2022: 6.99%
- Q3 2025: 21.2%
Homeowners with mortgage rates at 3% or lower:
- Q1 2022: 24.58%
- Q3 2025: 20%
Homeowners with rates between 3% and 4%:
- Q1 2022: 40.48%
- Q3 2025: 31.5%
We clearly have growth in higher rates and a decline with those who had lower rates.
You might wonder who would give up a 2.5% to 5% mortgage rate to buy a home at a higher rate, but the rate is just one factor. Home prices, property taxes, insurance and loan size all affect the total payment. This is different from the housing crash years, when over 23% of homes were underwater — now many Americans have substantial equity when they sell.
Not only do these homeowners have substantial selling equity, but their FICO scores since 2010 have been excellent, and their cash flows and total wages relative to their mortgage payments have been low. So, with a lot of selling equity and higher total wages, they have been able to sell their home and buy another one, even with a higher mortgage rate.
As you can see below, foreclosure data isn’t even back to 2019 levels, so many homeowners are in much better financial positions to sell their homes and buy another one. We don’t have many underwater homes in America, or high levels of foreclosures.
On the inventory side of the equation, we aren’t back to normal levels, but inventory has grown over the last few years. Usually, we have 2-2.5 million active listings, and we are at 1.43 million according to the National Association of Realtors data, with one more month of seasonal decline left. Remember, 40% of homes don’t even have a mortgage loan to lock them in.
When it comes to demand, first-time homebuyers face affordability challenges beyond just the mortgage rate — including home prices, taxes, insurance, down payment money and the size of the loan. These potential homebuyers clearly can’t be locked down by their mortgage rate because they don’t own a home yet.
Conclusion
To sum up, I haven’t supported the idea of a mortgage rate lockdown either in the past decade and or in this one. I also don’t believe that home sellers will suddenly change their behavior just because rates are higher.
Housing tenure has doubled or even tripled since 2008, a significant factor that is often overlooked, while most attention goes to the so-called golden handcuffs of a low mortgage rate.
A falling percentage of low-rate mortgages during a period of exclusively high-rate originations tells us nothing about homeowner behavior. That’s a denominator effect, not evidence that low-rate borrowers are selling. You’d need data on absolute counts or turnover rates by rate cohort to make that claim.
A low mortgage rate & lots of equity seems to keep people in their homes’ longer than in the past. In addition, those owners are doing HELOC’s to help family purchase homes.
@Ryan Kiefer, here ya go… Estimated number of new mortgage originations by buyers who sold a house, calculated from NAR data:
2022 Total Existing Home Sales~5.03 Million
% Who Sold Before Buying~38%
% of Repeat Buyers Who Financed~83%
– Estimated Number (Both Criteria)~1.58 Million*
2023 Total Existing Home Sales~4.09 Million
% Who Sold Before Buying~45%
% of Repeat Buyers Who Financed~73%
– Estimated Number (Both Criteria)~1.34 Million*
2024 Total Existing Home Sales~4.062 Million
% Who Sold Before Buying ~54%
% of Repeat Buyers Who Financed~69%
– Estimated Number (Both Criteria)~1.51 Million*
2025 Total Existing Home Sales4.061 Million
% Who Sold Before Buying ~54%
% of Repeat Buyers Who Financed~70%
– Estimated Number (Both Criteria)~1.53 Million*
*Key Trends and Data Points
Sold Before Buying: In 2024 and 2025, a record 54% of repeat buyers used proceeds from a previous home sale to finance their new purchase. This is a sharp increase from 2022, when only 38% used sale proceeds for their down payment.
New Mortgage Origination: High interest rates have driven a surge in cash purchases. In 2025, only 70% of repeat buyers financed their purchase with a mortgage, down from 83% in 2022.
Total Sales Volume: Annual home sales hit a 30-year low in 2025 at 4.061 million units, nearly identical to the 4.062 million sold in 2024.
Market Dominance: Repeat buyers now make up 79% of the total market, as first-time buyers have shrunk to a historic low of 21% due to affordability constraints.